Canadian Debt-to-Income Ratio Grows Yet Again Reports Debt Cafe

Ratio now higher than that of U.S. before financial collapse into recession

(EMAILWIRE.COM, January 04, 2013 ) San Francisco, CA -- Canada has once again reached a record level of debt. Canadians added a new level of debt load within the third quarter of the fiscal year of 2012. That rise pushes the debt-to-income ratio to 164.6%, which is a record. The figure is a modest rise from 163.3% from the second quarter, according to the Statistics Canada.

Meanwhile the Bank of Canada is continuing to show signs that persona debt is the top concern to the stability of the financial system, which is outlined in a newly released report.

The Bank of Canada's head, Mark Carney, stated that Canada is becoming more careful with borrowing, despite what the numbers show.

The new debt level is higher than the U.S. Debt levels prior to the economic downturn, the numbers may not be as damning as some may be apt to believe.

"The level of this ratio can be viewed as concerning given that it is above the 164% reached in the U.S. at onset of the credit crisis," wrote RBC economist David Onyett-Jeffries.

He added, "However, differences in the methodology used to calculate this measure in Canada and the U.S. make this comparison invalid ... the more comparable measure for Canada is 153% in Q3, 2012. This is historically elevated but is still below the U.S. peak."

While that is a comforting fact, there is much more behind officials suggesting signs of consumer cooling that is affecting the borrowing rate: there is a slowing of the rate of debt growth compared to years prior.

The growth of debt is at 5.4% within the last year alone, but that is a lower number than the 6.4% from the year prior, according to Deputy Chief Economist at BMO Capital Markets, Doug Porter.

"We're heading slowly but surely in the right direction. We're not quite there yet and we won't be there until household debt is growing slower than income," he said. Porter says he expects that debt figure to continue climbing, possibly into 2014.

"I wouldn't be surprised if it continues to rise through next year. I wouldn't be shocked. It might not be until 2014 that we see it stabilize," he said.

When it comes to comparing Canada's situation to the U.S. falter from 2008, he notes the focus should be on the standards are put toward lending.

"I don't think there's a magic number here. I think what really matters is who has that debt and how willing and able they are to pay it back," said Porter.

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